The Securities and Exchange Commission (SEC) has shut down an Initial Coin Offering (ICO) as conducting an unregistered securities offering. This is the first time the SEC has halted an ICO where there were no allegations of fraud representing a new shift in approach by the Enforcement Division of the SEC. At the end of November, the SEC Head of CorpFin stated more enforcement actions were forthcoming. The Munchee shutdown is perhaps the first of many to come.

Munchee, a blockchain-based food review service, was seeking $15 million for an App centered on restaurant meal reviews to create an “ecosystem” in which Munchee and others would buy and sell goods and services using the tokens. Munchee apparently agreed to the SEC action after being contacted by the Feds without admitting or denying the findings. Munchee has reportedly refunded all investor proceeds after the SEC intervened. Munchee commenced the refunds several weeks ago to “ensure it is in compliance with applicable laws/regulations.”

Similar to most ICOs, Munchee communicated through its website (since shut down, a white paper, and other means that it would use the proceeds to create the ecosystem, including eventually paying users in tokens for writing food reviews and selling both advertisings to restaurants and “in-app” purchases to app users in exchange for tokens.

In the course of the offering, the company and other promoters emphasized that investors could expect that efforts by the company and others would lead to an increase in the value of the tokens. Munchee also said it would take steps to create and support a secondary market for the tokens. The SEC said because of these and other company activities, investors would have had a reasonable belief that their investment in tokens could generate a return on their investment.

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. For more information, please visit: ncfacanada.org